Airbnb has gone from a one-room rental to a global vacation giant valued at
$10bn, with customers arranging 11m stays, in 35,000 cities in 192 countries

Back in 2008, two young design graduates were so strapped for cash, they could not pay their rent. They knew there was a design conference near their home, and a shortage of hotel beds, so the pair bought three mattresses, put them on the floor, and let them out.

That was how Airbnb got started. The two men, Brian Chesky and Joe Gebbia, were later joined by Nathan Blecharczyk, and together turned their idea into an online platform, putting people who are in search of a bed for the night in touch with those with a spare one to rent.

“We never considered the notion we were participating in a new economy,” Chesky said later. “We were just trying to solve our own problem. After we solved our own problem, we realised many other people want this.”

Five-and-a-half years on, the platform is flourishing. So far, its users have arranged 11m stays, in 35,000 cities in 192 countries, with accommodation ranging from luxury villas to tree houses to living-room sofas.

It proves particularly successful when – as in the case of the design conference – there are surges in demand. In London, Airbnb got a major boost around the London Olympics, when appetite for a place to stay was such that one taxi driver let out his cab for £50 a night.

The company, whose early backers included Ashton Kutcher, the actor and serial technology entrepreneur, and Andreessen Horowitz, the venture capital firm, does not disclose its financials.

However, PrivCo, a New York analysis firm which studies private companies, estimated that it took $189m (£113m) in revenues in 2012. Michael Pachter, an analyst at Wedbush Securities, predicted in early 2013 that that figure would soon hit $1bn a year.

Airbnb makes its money by taking a 3pc cut every time someone rents through the service. It may not actually own any beds, but a just-completed $450m funding round, led by TPG Capital, values the business at $10bn – more than Intercontinental Hotels.

Airbnb’s three founders are now worth more than $1bn a piece.

Unsurprisingly, this rapid growth has the traditional hotel industry worried.

Hotel trade organisations around the world have campaigned to have the service shut down, or tried to force hosts to comply with onerous red tape, originally designed for big businesses.

They have had varying degrees of success. In Britain, local councils are broadly happy to ignore old-fashioned legislation and are in discussions to scrap some laws which no longer make sense. But across the Atlantic, in New York, it is a very different picture.

Nowhere is the battle more intense than in Manhattan, where cramped hotel rooms cost an average of $267 a night.

Owners of these establishments object to the fact that Airbnb hosts are not held to the same safety standards as they are, and that many users will dodge hotel taxes, levied at around 15pc of the cost of a stay.

The city’s powerful Hotel Association also claims that people are breaking state laws whenever they let their homes out for fewer than 30 days at a time, unless they are there themselves.

Many hosts also find themselves in breach of their tenancy agreements, leading to evictions.

“Airbnb and a few other companies are changing the universe of what people assume are their rights as residents in neighborhoods,” Liz Kreuger, the New York State Senator who drew up some of these laws, told Time magazine. “It’s challenging the model of business regulation and frankly it’s wreaking havoc in certain communities.”

The hoteliers’ campaign has gained considerable traction. In 2013, New York attorney general Eric Schneiderman subpoenaed information on 15,000 New York-area hosts to determine if they were paying any hotel taxes. Airbnb has objected to the subpoena as too broad, and the two parties are currently in discussion to reach an out-of-court agreement.

The company has taken the point on taxes, however. Last month, the business wrote to Bill de Blasio, New York’s new mayor, asking permission to be able collect hotel taxes from Airbnb hosts, and hand it to the government itself, relieving individuals of the red tape, and ensuring the state received an extra $21m a year.

“New Yorkers [have] told us time and time again that paying their fair share was their top priority. We heard them loud and clear,” Chesky wrote later in the Huffington Post. “But today, officials tell us that current tax laws prevent us from collecting those taxes, and even if we did, the government couldn’t take the cheque.”

David Hantman, the company’s head of public policy, added with a flourish that that $21m would be enough money to buy textbooks for 420,000 schoolchildren and deliver 2.9m meals to the elderly.

Perhaps conscious that Airbnb was winning favour, the hotel lobby suddenly changed its tune. It now insists that Airbnb should not be allowed to pay taxes as a regulated entity, because that would lend it a veneer of respectability which it does not deserve.

“For them to turn over a law to collect taxes is them just trying to legitimise what we see as an illegal business,” said Geoffrey Mills, the Hotel Association’s chairman.

To many Airbnb loyalists, the hotel lobby’s objections are starting to look a lot like protectionism. Many New York establishments do a good job, but others, especially those on the outskirts of the city, have relied on limited competition to gouge money out of travellers and are suddenly losing traction.

Airbnb’s New York battle may be the fiercest it faces, but it is not the only one, by any stretch. In San Francisco, it is fighting against a similar clampdown on short-term rentals.

Meanwhile, in Amsterdam, the city authority was concerned that landlords would buy up swathes of apartments to turn them into Airbnb flats, forcing long-standing tenants out.

It is a familiar war for companies that participate in the so-called sharing economy. Uber, a service which allows people to summon a minicab on their smartphone, and Lyft, which enables ordinary people to run a de facto taxi service, has faced fierce opposition from San Francisco’s licensed taxi drivers.

They have run a virtual monopoly for years, but suddenly the old system is under threat.

But while the regulatory battles are vicious, it seems difficult to resist the rise of sharing services, which lessen the burden on the environment by reducing demand for resources, and which make economic sense by empowering individuals to become micro-entrepreneurs.

Alongside Lyft and Airbnb are services such as Parking Panda, which allows people to rent out their driveways, Rentoid, which lets users hire someone else’s rarely used camping equipment for a fraction of the price it would cost to buy, and Taskrabbit, which allows people to advertise for help with office errands or chores.

“The world is going in our direction. People demand it and it is here to stay,” Hantman told The Sunday Telegraph.

Airbnb brings many social benefits as well, he adds. In the end, research by Amsterdam’s city authority found that the service actually helped to keep communities intact. By renting out their spare rooms on Airbnb, existing residents were able to raise a bit of extra cash to pay the rent, enabling them to stay in their homes despite the onward march of gentrification.

Arguably, Airbnb always needed the downturn to get off the ground in the first place. For many people, the idea of inviting a stranger to stay on their sofa, or handing them the keys to their house, is a deeply uncomfortable one, born out of necessity rather than choice.

“The leap is a big one, so it starts off as a financial decision,” says Hantman.

Equally, a lot of travellers only resorted to Airbnb because they couldn’t afford or couldn’t find a traditional hotel, leading to a few lean years.

The founders “ate nothing for two years, because it was a total failure. It is only in the last three years that this has been anything of relevance,” says Hantman.

Once people tried it, however, many were hooked, and these days, Airbnb’s community is borderline evangelical about the service.

Travellers appreciate the insight home-stays give them into ordinary life in a city, rather than the overpriced tourist version, as well as the opportunity to stay in some whacky constructions. Many users have also forged friendships with their hosts.

Inevitably, there have been some disaster tales. In recent weeks, one Airbnb host returned back to his Manhattan apartment unexpectedly, only to find that it was being used to host an orgy. Reports have also emerged of prostitutes renting out flats and turning them into temporary brothels.

These are the most headline-grabbing scare stories, but Airbnb’s message boards also turn up more ordinary problems: guests damaging property, incidences of theft, and hosts who have made their guests feel uncomfortable.

Airbnb has a “trust and safety team” which tries to combat these events, but Hantman admits that with 11m users, the service is vulnerable to “everything that happens in life”. “To be honest, it is surprising how little it happens.”

Inevitably, these events have been seized upon by Airbnb’s critics, hoping to discredit the service and put a dent in its popularity.

They are unlikely to cause any great worry to investors, however. Analysts have interpreted the company’s recent capitulation over taxes as a sure sign that it is preparing for an initial public offering.

Chesky has gone on record saying no such thing is in the works for 2014.

“We will do it at a time when it benefits the company – when we have a good reason,” he told the Wall Street Journal. But for some observers that was as good as saying it will happen next year, just around the corner.

Airbnb “is giving every clear signal of going public”, says PrivCo’s chief executive, Sam Hamadeh. “When you have an IPO pending, the last thing you want is regulatory uncertainty.”